Delay in Transition to Euro-5 Will Allow to Avoid Petrol Shortage of Domestic Market

3 november 2015

The Analytical Center released a new Energy Bulletin 'Standards for motor fuel' which deals with the delay of the transition to the Euro-5 petrol, as well as the situation in the coal industry and provisions of new Chinese projects with energy.

At the present time, the technical regulations of the
Customs Union adopted in 2011 are in force, according to which Russia
should switch from Euro-4 to Euro-5 petrol and diesel
fuel since January 1, 2016. Russia was in time with the switch
from Euro-3 to Euro-4 in 2015, and there was no deficit of motor
fuel. However, in October 2015 it was decided to postpone the ban on the sale
of Euro-4 petrol in Russia from 1st January, 2016 to six months
frontwards. This transition is not absolutely necessary for the market, but it
will allow to avoid the risk of a shortage of petrol in the domestic
market that can reach 1 million tons.

Why has the term been prolonged only for petrol? A
part of oil companies is late with the transition to a new
emission standard of fuel and regularly asks for a time
extension that they receive so that we would avoid possible
shortages of petrol. In addition, drivers with high incomes can buy a
high-quality and expensive petrol in Russia, but it can be problematic for
other car owners.

Also, the Bulletin addresses the situation in the coal
industry - the country's only fully private and relatively efficient. However,
labor productivity is still low, transport costs are high, and domestic demand
is constrained by the competition with cheap petrol. And the
possibility of exports (11% of the world's exports!) is largely dependent
on preferential domestic railroad tariffs. In world markets,
thew expansion of coal will eventually be stopped by measures to protect
the climate, that's why perspectives of the industry are complex.

Experts also write about initiatives of China in the
development of the New Silk Road, that presuppose the creation of energy
carriers flows. Russian manufacturers will have to adapt to reality of low
oil price that among other equal things force to assess the profitability of
projects tougher. Means of energy carriers supplies in Asia will be tied to
regions with the highest growth rates.